Case Study Description of Kmart and ESL Investments (A)
A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.
Swot Analysis of "Kmart and ESL Investments (A)" written by Stuart C. Gilson, Sarah L. Abbott includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kmart's Reorganized facing as an external strategic factors. Some of the topics covered in Kmart and ESL Investments (A) case study are - Strategic Management Strategies, Financial analysis, Financial management, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Kmart and ESL Investments (A) casestudy better are - – digital marketing is dominated by two big players Facebook and Google, technology disruption, increasing transportation and logistics costs, increasing energy prices, there is backlash against globalization, there is increasing trade war between United States & China, increasing household debt because of falling income levels,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Kmart and ESL Investments (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kmart and ESL Investments (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kmart's Reorganized, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kmart's Reorganized operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Kmart and ESL Investments (A) can be done for the following purposes –
1. Strategic planning using facts provided in Kmart and ESL Investments (A) case study
2. Improving business portfolio management of Kmart's Reorganized
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kmart's Reorganized
Strengths Kmart and ESL Investments (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kmart's Reorganized in Kmart and ESL Investments (A) Harvard Business Review case study are -
Organizational Resilience of Kmart's Reorganized
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kmart's Reorganized does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Kmart's Reorganized digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kmart's Reorganized has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Cross disciplinary teams
– Horizontal connected teams at the Kmart's Reorganized are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Finance & Accounting industry
– Kmart and ESL Investments (A) firm has clearly differentiated products in the market place. This has enabled Kmart's Reorganized to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Kmart's Reorganized to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Kmart's Reorganized in the sector have low bargaining power. Kmart and ESL Investments (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kmart's Reorganized to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Kmart's Reorganized has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kmart's Reorganized has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Kmart's Reorganized is present in almost all the verticals within the industry. This has provided firm in Kmart and ESL Investments (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Kmart's Reorganized is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Kmart's Reorganized is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Kmart and ESL Investments (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Kmart's Reorganized is one of the most innovative firm in sector. Manager in Kmart and ESL Investments (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the Kmart and ESL Investments (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Kmart's Reorganized is one of the leading recruiters in the industry. Managers in the Kmart and ESL Investments (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Kmart's Reorganized is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Stuart C. Gilson, Sarah L. Abbott can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Kmart and ESL Investments (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kmart and ESL Investments (A) are -
Low market penetration in new markets
– Outside its home market of Kmart's Reorganized, firm in the HBR case study Kmart and ESL Investments (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Kmart's Reorganized has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Aligning sales with marketing
– It come across in the case study Kmart and ESL Investments (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Kmart and ESL Investments (A) can leverage the sales team experience to cultivate customer relationships as Kmart's Reorganized is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Stuart C. Gilson, Sarah L. Abbott suggests that, Kmart's Reorganized is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Kmart's Reorganized has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kmart's Reorganized is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Kmart and ESL Investments (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Kmart's Reorganized needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Kmart's Reorganized supply chain. Even after few cautionary changes mentioned in the HBR case study - Kmart and ESL Investments (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kmart's Reorganized vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Kmart and ESL Investments (A) HBR case study mentions - Kmart's Reorganized takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Kmart's Reorganized has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Kmart's Reorganized even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Increasing silos among functional specialists
– The organizational structure of Kmart's Reorganized is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Kmart's Reorganized needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kmart's Reorganized to focus more on services rather than just following the product oriented approach.
Opportunities Kmart and ESL Investments (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Kmart and ESL Investments (A) are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Kmart's Reorganized to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Kmart's Reorganized has opened avenues for new revenue streams for the organization in the industry. This can help Kmart's Reorganized to build a more holistic ecosystem as suggested in the Kmart and ESL Investments (A) case study. Kmart's Reorganized can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Kmart's Reorganized can develop new processes and procedures in Finance & Accounting industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Leveraging digital technologies
– Kmart's Reorganized can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Kmart's Reorganized can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Kmart's Reorganized has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Kmart's Reorganized can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Kmart and ESL Investments (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Kmart's Reorganized to increase its market reach. Kmart's Reorganized will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kmart's Reorganized can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Kmart's Reorganized can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kmart's Reorganized can use these opportunities to build new business models that can help the communities that Kmart's Reorganized operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Kmart's Reorganized in the consumer business. Now Kmart's Reorganized can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kmart's Reorganized to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Kmart's Reorganized to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kmart's Reorganized in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Threats Kmart and ESL Investments (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kmart and ESL Investments (A) are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Kmart's Reorganized business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kmart's Reorganized in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Kmart's Reorganized can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High dependence on third party suppliers
– Kmart's Reorganized high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Consumer confidence and its impact on Kmart's Reorganized demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Kmart's Reorganized is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Kmart's Reorganized needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Kmart's Reorganized will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Kmart's Reorganized.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Kmart and ESL Investments (A), Kmart's Reorganized may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kmart's Reorganized can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Kmart and ESL Investments (A) .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Kmart's Reorganized needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Kmart and ESL Investments (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Kmart and ESL Investments (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Kmart and ESL Investments (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Kmart and ESL Investments (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Kmart and ESL Investments (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Kmart's Reorganized needs to make to build a sustainable competitive advantage.